Why Tesla’s Market Share Could Plunge In 2023

By | December 19, 2022

Consumer credit reporting and data analytics company Experian just released its Automotive Market Trends for Q3 2022. The report covers vehicles in operation (VIO) by model year, segment, age and market share, as well as other US light duty vehicle data through September 30, 2022.

The report is full of good data, but I was especially interested in its analysis of electric vehicles (EVs).

At the end of Q3, pure EVs made up 0.69% of the overall light duty vehicle registrations, with hybrid vehicles contributing another 2.4%. Although overall vehicle registrations were down from a year ago, EV registrations increased significantly since Q3 2021. In Q3 2022, EV registrations accounted for 5.6% of all vehicle registrations, compared to 3.1% a year ago.

Tesla continues to dominate EV sales, with 65.4% of the EV market. However, that is down from 68.2% in 2021 and 79.4% in 2020.

With the market growing, Tesla is still rapidly growing its vehicle sales despite its loss of market share. But, there are reasons for concern.

Tesla failed to meet Q3 estimates with 343,000 vehicles delivered versus street estimates of 358,000. The company blamed the highly challenging environment for transport and logistics, and there is certainly truth in that statement.

However, next year we may start to see the “Twitter effect” come into play.

Tesla CEO Elon Musk completed his purchase of Twitter on October 27, 2022. Since then, he has made a series of controversial decisions — which many view as missteps. I won’t review the decisions he has made, but they have generally been derided by liberals and cheered by conservatives.

That may have market consequences for Tesla.

A recent Pew Research poll showed that Democrats are two and a half times as likely as Republicans to consider purchasing an EV. Consider, for example, that amazingly Democratic California alone had more than a third (35.9%) of all new EV registrations from January through September of this year, versus 7.4% for Florida and 6.4% for Texas.

It’s anecdotal, but I have heard multiple people say that because of Musk’s Twitter decisions, they would no longer consider buying a Tesla. I know of people who actually did cancel their Tesla orders. In fact, numerous people have shared their cancellations on Twitter. I don’t think there’s any doubt that there will be some repercussions.

There are a couple of things in Tesla’s favor, though. One is that Tesla’s competitors are still racing to catch up. There just aren’t enough alternatives to meet demand if a substantial fraction of potential Tesla customers decide to look elsewhere. Further, there are still supply chain constraints that continue to hamper the ability of car makers to ramp up production.

The other thing in Tesla’s favor is that some are in favor of what Musk has done at Twitter, and that may make them more likely to support him by purchasing a Tesla. But, the fact that Republicans are far less likely to purchase an EV means that Tesla will likely lose even more market share as Musk’s supporters and detractors vote with their pocketbooks.

Musk’s Twitter controversies have undoubtedly been a factor in this year’s share price decline for Tesla. Year-to-date, shares have fallen by 62.5%, versus a 33.4% decline in the Nasdaq. Since Musk’s October acquisition of Twitter was completed, Tesla shares are down by 33.4% versus a mere 3.9% decline in the Nasdaq. That kind of move in such a short time is clearly not simply a result of interest rate hikes by the Federal Reserve.

This may all lead to a much steeper decline in Tesla’s market share in 2023, depending on how much of the void competitors can fill.

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